Asian stocks on Tuesday took a breather after a brief rally triggered by expectations that a trade deal might be within grasp and that the US Federal Reserve could put its monetary policy tightening on pause if economic growth slows further.
MSCI's broadest index of Asia-Pacific shares outside Japan shed early gains, losing 0.1 percent to $478.18 as weakness in China and Taiwan weighed on the index. The Shanghai Composite last stood 0.2 percent lower to CN¥2,526.46, while Taiwan Weighted fell 0.2 percent to NT$9,563.60.
Japan’s Nikkei gained 0.9 percent to ¥20,218.50, while South Korea’s KOSPI dropped 0.5 percent to ₩2,025.27. Hong Kong’s Hang Seng added 0.1 percent to HK$25,862.00.
Cross-assets Strategist Masanari Takada stated that market pessimism has been rolled back, partly helped by hopes for the US-China trade talks, but many investors are still trying to play it safe and it is yet to be seen whether the recovery continues, or ends up as a short-term relief rally.
In the US, the S&P 500 added 0.7 percent to $2,549.69 on Monday following a 3.4 percent climb on Friday, with e-commerce firm Amazon.com Inc. and online media-services provider Netflix Inc. as main drivers of the rally.
Rise in tech names slightly eased concerns, prompted by tech giant Apple Inc.’s warning last week, about the thriving sector beginning to feel the impact of the US-China trade war.
US-China Trade Deal, Fed Policy Potential Pause
US Commerce Secretary Wilbur Ross said China and the US could achieve a trade agreement that they can live with as dozens of officials from the two countries continued negotiations in an effort to resolve trade frictions.
The world’s second biggest economy had the good faith to work with the US to settle their trade dispute, according to China’s Foreign Ministry, although several analysts were uncertain the two parties can reach a comprehensive deal on all of the divisive matters before a March deadline.
Investors also continued to go for battered shares as a result of better-than-expected US job data on Friday and statement by Fed Chair Jerome Powell that he was aware of the risks and would be patient and flexible in policy decisions this year.
Powell’s comments helped allay market worries over the possibility of the Fed overlooking signs of an economic slowdown and sticking to its plan of two interest rates hikes for 2019.
Various concerns markets had earlier are receding for now, although there is no denying that the US earning momentum is slowing, according to Chief Global Strategist Hirokazu Kabeya, adding that ultimately they need to see whether upcoming earnings reports can dispel market concerns.
Analysts see a 15 percent growth in the fourth-quarter earnings of the S&P 500-listed companies, below the 20 percent increase posted three months earlier.
The forecast for profit growth this year has declined around 6.9 percent from 10.2 percent. Outlook for tech firms have also dimmed, as earnings growth slipped to 2.7 percent from 8.5 percent.
Forex Head Kazushige Kaida stated that there have long been suspicions that US tech companies might be overvalued, and in a way Apple gave markets confirmation.
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